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March 12, 2019

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Nvidia buys Israeli chip firm Mellanox

US chipmaker Nvidia Corp said yesterday it would buy Israeli chip designer Mellanox Technologies Ltd for US$6.8 billion, beating rival Intel Corp in a deal that would help the company boost its data center business.

The all-cash offer of US$125 per share represents a premium of 14 percent to Mellanox’s Friday close.

Shares of Mellanox rose 8.7 percent and Nvidia shares rose about 1 percent in premarket trading. The deal follows a competitive bidding process, which according to sources familiar with the matter included rival chipmakers such as Intel. CNBC reported in November that Xilinx Inc was also part of the process.

Intel declined to comment on whether the company had bid for Mellanox, while Xilinx did not immediately respond to a request for comment.

Mellanox, based in Israel and the United States, makes chips and other hardware for data center servers that power cloud computing. The company had a market capitalization of about US$5.9 billion at the end of trading on Friday.

Bernstein analyst Stacy Rasgon said Nvidia has been pushing more into networking and connectivity with its own tailored solutions and Mellanox would bring further expertise along these lines.

“But going out and buying an asset right now, immediately after the recent spate of guide downs may raise a few eyebrows,” said Rasgon.

“It will probably spark questions as to whether Nvidia sees anything changing regarding the growth trajectory of their core data center business.”

Nvidia cut its fourth-quarter revenue estimate by US$500 million in January because of weak demand for its gaming chips in China and lower-than-expected data center sales.

Data center revenue accounts for nearly a third of Nvidia’s sales.


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